From: James H. White
To the Commission:
I am a member of the class of investors who would be barred from investing in private funds under the proposed rule revision. While I have never invested in private funds, I have participated as issuer's counsel in municipal bond offerings that were voluntarily limited to "accredited investors." I have no present business or professional interest or connection to any part of the industry that would be affected by this rule.
The idea of limiting certain investments to demonstrably sophisticated investors has plausible merit, but the use of net worth as a proxy for sophistication is fundamentally without logic. I would suggest that a new approach needs to be entertained, in which the skills and judgment of a potential investor are addressed more directly. What I understand to be the British approach of placing the burden on investment advisors and marketers to determine suitability of potential investors regardless of new worth is one possible direction.
The paternalism and discrimination inherent in a net worth (or net investment worth) rule is compounded by its lack of logic. Young investors who have yet to accumulate a particular amount of capital may be extremely sophisticated, but are pushed from private funds to private equity funds or other investment choices that may be more volatile and even riskier than most private funds. By contrast, elderly investors who have accumulated capital over the years simply are not thereby transformed into investment experts.
Something better needs to be developed.
Thank you for the opportunity to comment on this proposal.
James H. White
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